Last week, Moody’s Investors Service downgraded two merging midstream companies, according to Fuel Fix. On Thursday, Jan. 7, Moody’s cut the credit rating of Williams Companies to a speculative level and downgraded the debt of affiliated Williams Partners to the lowest investment grade. On Friday, Jan. 8, Moody’s lowered its ratings outlook on Energy Transfer Equity from positive to stable.
In September 2015, Energy Transfer Equity reached a deal to acquire Williams. The merger, which the companies expect to close in the second quarter of this year, would create one of the nation’s largest energy infrastructure companies. Fuel Fix notes that both companies' share prices have dropped, largely due to depressed oil and gas prices. Last year, shares of Williams Partners and Energy Transfer Partners, the companies’ flagship partnerships, fell approximately 50%. Williams Partners currently retains its investment grade rating, although Moody’s cut it to the lowest tier of investment-grade debt rating.
Fuel Fix reports that Moody’s has cut the rating on the Williams Companies’ unsecured debt by one notch from the lowest investment grade rating to the highest speculative debt rating – an important threshold that Fuel Fix says can crimp investment.
In changing the credit outlook for Energy Transfer’s parent company, Energy Transfer Equity, Moody’s cited Williams’ debt and the pending merger, in which Energy Transfer Equity will acquire Williams Companies, while subsidiaries will remain separate. Post-merger, Energy Transfer Equity will be the parent company of Williams Partners LP.